8 ways entrepreneurs can launch a successful platform business

Photo credit: Prayitno.

Startup founders are all too familiar with the dilemma. You’ve built this marvelous product – say, a marketplace for secondhand surfboards. Now, you’re struggling to convince surfboard sellers to sign on to the platform, because there aren’t many potential buyers yet. And vice versa: buyers aren’t interested in your site, because there aren’t enough sellers to choose from.

It’s a classic “chicken-or-egg” problem. If you believe Platform Revolution, a book co-authored by Sangeet Choudary, Geoffrey Parker, and Marshall Van Alstyne, it’s a typical situation entrepreneurs find themselves in if they’re building a platform business.

If you’re not familiar with the term, platforms – as opposed to traditional businesses – are companies that don’t make money by selling goods or services they produce themselves. Platforms bring people with complementary needs together and profit from the resulting transactions. Airbnb and Uber are often-cited examples of this concept.

So how do entrepreneurs solve the chicken-or-egg problem? Platform Revolution dedicates an entire section to this, describing eight strategies the authors have seen emerge over the years.

I found this particularly helpful. Are Southeast Asian startups employing these strategies successfully?

1. Follow the rabbit

Photo credit: Myrna Litt.

The first option to deal with the chicken-or-egg problem doesn’t really count, because it works only if you’re already managed to build up a company with an existing audience or customer base.

The news site you’re reading right now is a perfect example of this strategy. Tech in Asia used to be a traditional media company where writers produced content and delivered this to readers.

In 2015, Tech in Asia turned its focus outward, encouraging reader engagement and enabling community contributions. This site became a platform, with the mission to build links between the diverse players of Asia’s startup ecosystem. The transformation wouldn’t have been possible if Tech in Asia didn’t already have a group of loyal readers.

2. The piggyback strategy

If you’re building a company from scratch, “follow the rabbit” is useless advice to you. But you can piggyback – cleverly build your platform so it fulfills a need of an existing company.

Payment startups often follow this strategy as they’re solving a major pain point of many other platforms (like ecommerce marketplaces) experience.

PayPal is the classic example. Its ballsy piggyback ride on Ebay is thoroughly described in Platform Revolution. PayPal went so far as to build bots that would attempt to buy products, and then demand to pay via PayPal. This made sellers adopt the new payment option, and when more sellers declared that they accept PayPal, more real buyers got curious about it.

3. The seeding strategy

4. The marquee strategy

5. The single side strategy

6. The producer evangelism strategy

7. The big bang strategy

8. The micro market strategy

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